States are free to fix stock-holding limits as well as the period of holding sugar, but those can’t be higher than the caps set by the food ministry.

States are free to fix stock-holding limits as well as the period of holding sugar.

The government on Wednesday decided to extend the curbs on sugar stocks a dealer or a trader can pile up by six months through October 28, aimed at discouraging hoarding and keeping sugar supplies steady amid a drop in output. “The main objective of the decision is to enable the state governments to issue control order with the prior concurrence of the central government, for fixing stock limits/licensing requirements in respect of sugar, whenever need is felt by them,” the food and consumer affairs ministry said in a statement after a Cabinet meeting.

The Cabinet on April 27 last year decided to introduce, after a gap of close to five years, the stock-piling limits to ensure that sugar prices don’t surge due to manipulations by hoarders. Under this, each dealer or trader can stock up to 500 tonne in all states, barring parts of West Bengal. The stock-piling limit for a dealer in Kolkata and extended areas in West Bengal has been set at 1,000 tonne. Dealers can’t hold sugar for more than a month from the day of receiving the stocks, the food ministry said.

States are free to fix stock-holding limits as well as the period of holding sugar, but those can’t be higher than the caps set by the food ministry. In late 2011, the government had scrapped the stock holding limit on sugar due to plentiful supplies.

After remaining mostly subdued in recent years and hitting a seven-year low in early 2015, domestic sugar prices climbed since the last marketing year started on October 1, 2015 on apprehensions of a drop in sugar output due to dry spells in Maharashtra and Karnataka.

While the food ministry has projected production to drop to 22.5 million tonne for the current marketing year through September, down from the official estimate of 25.1 million tonne in 2015-16, the Indian Sugar Mills Association has pegged output at just 20.3 million tonne for 2016-17.

To boost supplies, the government this month allowed duty-free imports of raw sugar up to five lakh tonne until June 30 under a tariff rate quota. This is for the first time since 2012 that imports of sugar under the open general license (OGL) will take place at zero duty, albeit in limited quantity. Imports of raw sugar beyond the stipulated quantity and the deadline will, however, attract the 40% duty that has been imposed since April 2015.

A government official had told FE that the decision to allow limited duty-free imports was aimed at keeping domestic supplies steady in case consumption picked up and also to have adequate stocks by the end of this season to avoid a shortage before the new sugar came in. “As of now, we don’t have any real shortage of sugar due to massive carry-forward stocks from 2015-16,” he had said. Ex-factory sugar prices have remained flat in the last 3-4 months.